Under this update, NFPs will classify the cash receipts from the sale of donated financial assets consistent with where the NFP classifies its cash donations received when the sales of the financial assets donated is nearly immediately converted to cash without any NFP-imposed limitations for the sale. Under this scenario, the cash flows would be recorded as an operating cash flow, as long as there is no donor restricted use imposed for long-term purposes. If there is a restriction imposed for the use for long-term purposes, then the cash receipts should be classified in financing activities. If the financial assets are not nearly immediately converted to cash, then at the time a sale does occur, the cash inflows will be classified as cash flow from investing activities for the NFP.

ASU No. 2012-05 is effective prospectively for fiscal years, and interim periods within those years, beginning after June 15, 2013. Retrospective application to all prior periods presented upon the date of adoption is permitted.

About the AuthorJustin Hayes is a director in Katz, Sapper & Miller’s Audit and Assurance Services Group. Justin works with clients to help ensure accurate financial reporting, keeping an eye on their bottom line, and helping them avoid risk and maximize efficiencies. Connect with him on LinkedIn.